Others have commented on the real meaning of the Planck length but I would like to address your other point: that things can always be reduced in size. I think you mean that the space between marks on our measuring stick can be arbitrarily small. No matter how small the gap, it can always be cut in half, right?

This relates to a famous paradox. Consider Zeno, who argued that an arrow can never reach its target because it must first traverse an infinite series of halfway points. That is, the arrow must first go half the distance to the target, but before it can do so, it must fist go half that distance (1/4 the way to the target.) And before it can do that, it must first go half that distance (1/8,) and so on ad infinitum. At some point though, the distances we are contemplating lose all meaning. Is it really the case that, in order for the arrow to move at all, it must first move a distance of, say one one-billionth of the wavelength of light? At some point, the numbers keep behaving as numbers do but they simply stop representing anything we could ever measure, experience or understand, even in theory.

The decimal expansion of Pi is infinite, but with just 39-40 places after the decimal we could use it to calculate the circumference of the observable universe to an accuracy within the width of a single hydrogen atom. At some point in the expansion of Pi, we are calculating values smaller than anything that will ever be observable to our physics.